FTSE 100 live outlook prediction analysis for 20th March 2020
The Bank of England has made its second emergency cut to interest rates in a fortnight, slashing the Bank rate to an all-time low of 0.1pc as it tries to contain the economic shockwaves of the coronavirus outbreak. The Monetary Policy Committee decided on the 0.15 percentage point cut at an emergency meeting on Thursday, simultaneously announcing it would buy £200bn in bonds as part of expanded quantitative easing measures. The cut is likely as low as the Bank is willing to go – teeing up Chancellor Rishi Sunak to deliver increased fiscal stimulus to offset the shock from Covid-19.
Sentiment in Europe was more positive and the session ended with the FTSE 100 closing 1.83pc higher at 5,173.51. The domestically focused FTSE 250 however fell 1.08pc to 12,869.70. In the eurozone, the DAX, CAC and MIB all closed 2pc up.
US markets edged slightly higher after a volatile session. Investors weighed massive government stimulus measures against some of the first data pointing to the sharp US economic slowdown. The Dow Jones climbed 0.95pc to 20,088 while the S&P 500 ended up 0.47pc at 2,409. The tech-heavy Nasdaq performed the best, climbing 2.3pc.
Double Distress
In less than two weeks, the amount of distressed debt in the U.S. alone has doubled to a half-trillion dollars as the collapse of oil prices and the fallout from the coronavirus shutters entire industries. In all, U.S. corporate bonds that yield at least 10 percentage points above Treasuries, as well as loans that trade for less than 80 cents on the dollar, have swelled to $533 billion, data compiled by Bloomberg show, up from $214 billion on March 6. Going global, the distressed pile could top $1 trillion, estimates from UBS Group AG show. “We could see this be worse than 2008,” said Philip Brendel, a senior distressed credit analyst at Bloomberg Intelligence. Why should we care? Distressed debt is a term used to describe the borrowings of companies that are perceived to be under acute financial pressure and often suggests that there’s considerable risk those borrowers will default on their obligations. As a global recession looms, there’s a good chance that more and more corporations could end up in similarly dire straits.
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
Looks a little bit more positive this morning, and that 4850 level seems to be holding as the low for the moment. The question is how far we might climb. Looking at the S&P we have resistance at the 2460 level from the 200ema and we have R1 here today. If the bulls were able to break through that then we could see a pretty decent bounce towards the 2700 level next week. Or maybe today given recent volatility! Of course, a lot depends on the news. We have had unprecedented stimulus measures though which are starting to filter through. Remember also that the market generally looks six months ahead so its pricing based on where it will be then. If we have another month or so of chaos then emerge (and every scientist in the world is working on C-19 so should have a shorter timescale for vaccine/treatment) we may well see some normality return. Here’s hoping! Definitely going to be a different financial/economic landscape in the future.
For today I am looking at initial resistance at the 5385 level as we have R1 here and also a daily level. Above this then 5530 is the top of the 20 day Raff and may well be reached if the bulls charge. We have just popped above the 10 day Raff channel for the first time in a long time as well. We also have R2 at 5561.
For support I am looking at a dip down from that first resistance to test the 30min coral line and backtest the key fib level at the 5180 level. We also have the 200ema on the 30min now at 5203, so there are some decent looking supports at this 5170 to 5200 area. If that holds then we may well then see a leg higher this afternoon.
So watching 5385 initially, and then support at the 5180 level. As per yesterday I am thinking buy the dip is the move today. Have a great weekend and lets see how the news pans out over it.
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